With a population of roughly 114 million people, Ethiopia is the second most populous country in sub-Saharan Africa, and one of the fastest growing economies in the world. Ethiopia has registered impressive economic growth for several years, ranging between 8 percent and 12 percent. The World Bank and IMF forecast a growth of 8.1 percent in 2015/16 and an average of 7.5 percent over the next three years. The Government of Ethiopia (GoE) follows a series of integrated five-year development plans, called Growth and Transformation Plans (GTP) to guide the state-led industrial development. GTP II, covering 2016–2020, sets the overall target to achieve an average growth of 11% in the next five years and lays the ground to attain lower-middle income status by 2025. To realize these goals, the GoE continues to invest heavily in large-scale social, infrastructural and energy projects.
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Ethiopia’s geological formation showed extensive mineral resources with wide-ranging potentials for continuing development. Minerals found in Ethiopia include; gold, platinum, niobium, tantalum, nickel, cooper, chrome, manganese, limestone, sandstone, gypsum, clay, lignite, opal, oil shale, laterite iron ore, bentonite, clay, perlite, diatomite, potash, halite, and oil & gas. The mining and quarrying sector is highly underdeveloped and in 2014/2015 its contribution to the GDP was limited to 5.6 percent. Gold is the major exportable commodity, earning US$300-500 million per year in foreign currency to the Ethiopian economy. As of January 2016 there were about 170 licensed companies engaged in exploration and development of gold where 51 percent of the licenses were issued to foreign firms while 21 percent are joint ventures. Many foreign and some local companies have been granted reconnaissance, exploration and mining licenses for gold and base metals, cement and ceramic raw materials, potash, diatomite, other industrial and construction minerals. Generally, an exploration license is issued for ten years; initial three years followed by a yearly renewal for seven years. Ethiopia has had consistently high economic performances globally over the past 10 years averaging 10% and inward FDI has more than doubled in recent years (UNCTAD).
Agriculture is the main stay of the economy; and exports are almost entirely composed of agricultural commodities. Coffee fetches the largest foreign exchange. Other agricultural products that earn foreign exchange include oil seeds, dried pulses, hide and skin as well as live animals. The young flower industry is also becoming another source of foreign revenue. Ethiopia’s export of coffee represents about one percent of the global export while oil seeds and flowers each contribute 0.5% to the world market.
Agriculture accounts for 43 percent of GDP and 90 percent of exports. Cereal production which dominates Ethiopian agriculture has increased significantly over recent years, and production estimates for 2010 stand at 18.8 million metric tonnes, which is more than double the production averages in 2000 and 2003 (GIEWS, 2011). Official figures for the livestock sector estimate that livestock production accounts for about 32 percent of agricultural GDP. However, research carried out by FAO for IGAD suggests that the real figure is believed to be closer to 45 percent of agricultural GDP as other livestock functions including the value of draught power to crop production were not captured (IGAD, 2010). During the period covering 2004 – 2010, the agriculture sector expanded by an estimated 13 percent with per capita cereal production rising from below 150 kg in 2004 to more than 213 kg in 2007, and 235 kg in 2010.
Laws and Regulations
Mining Regulations in Ethiopia:
- Mining Proc No. 678/2010 (as amended) Amendment 816/2013
- Income Tax Proc No. 979/2016
- Mining Regulation 182/1994 (as amended) Amendment 423/2018
A person is required to obtain a license to engage in mining activity in Ethiopia. Mineral operation licenses are issued by the Federal Ministry of Mines and the Mines Bureaus of Regional States.
Five types of key licences can be issued by the Licensing Authority, being summarised as follows:
Non-exclusive reconnaissance licence – is valid for up to 18 months and is not renewable. An applicant must show that it has sufficient financial resources and technical ability to conduct the proposed exploration, that the estimated expenditure complies with the prescribed minimum exploration expenditure and the environmental impact plan is approved.
Exploration licence – is valid for up to three years and may be renewed twice for a period of up to one year. The licensee has the right to apply for and be granted a retention licence or a mining licence. Such licensee may remove and transport minerals found during exploration to conduct tests with the prior written consent of the Licensing Authority. The licensee must commence exploration activity within 60 days from the date of the licence and keep duplicates of samples removed and transported for tests or analysis.
Retention licence - is granted for up to three years and can be renewed for up to three years. Applicants must demonstrate the discovery of a mineral deposit which is of commercial significance and cannot be developed immediately because of adverse market conditions or unavailable processing technologies. The licensee has the right to be granted a mining licence prior to the expiry of the retention licence. Annual progress reports are required to be submitted to the Licensing Authority regarding market conditions and technical factors, noting why a retention licence is required and what efforts are being taken to ensure mining operations commence before expiry of the licence.
Small and large scale mining licences – are granted to applicants where the proposed work program is approved, the applicants have access to financial resources and technical ability to conduct the proposed mining operations and the environmental impact assessment has been approved. A small scale licence is valid for up to ten years and may be renewed for up to five years. A large scale mining licence is valid for up to twenty years and may be renewed for up to ten years. The holders of small or large scale mining licences shall have the right to market and sell the minerals produced. In addition, mining operations must be commenced within one year from the date on which the licence becomes effective.
Artisanal mining licence - provides an exclusive right to explore and mine for the minerals within the licence area. A licensee shall be obliged to undertake mining operations according to the environmental, health and safety standards prescribed for artisanal mining in the relevant laws. This type of licence is valid for up to three years and may be renewed twice for three years each.
In 2020, with a population of 114,963,588 adult literacy rate in Ethiopia is 49.10 per cent. Although the Ethiopian adult literacy rate fluctuated substantially in recent years, it tended to increase through 1994 - 2015 period ending at 49 % in 2015.
While labour remains readily available and inexpensive in Ethiopia, skilled manpower is very limited. Approximately 50 percent of Ethiopians over the age of 15 are illiterate according to UNESCO’s definition. However, on the bright side Primary school enrollment rate (age 7 to 14), has now reached 94 percent. In order to increase the skilled labour force, the Government of Ethiopia has undertaken a rapid expansion of the university system in the last 20 years, increasing the number of higher public education institutions from three to 49. It has adopted an education policy that requires 70 percent of public university students to study science, engineering, or technology subjects, however, a high number of students are not well-prepared by secondary school to study in those fields, therefore implementing this policy may be challenging.
Ethiopia has ratified all eight core International Labor Organization (ILO) conventions. The Ethiopian Criminal Code outlaws work specified as hazardous by ILO conventions. There is no national minimum wage, and public sector employees – the largest group of wage earners – earned a monthly minimum wage of ETB 420 (approximately USD 19). (US 2019 Investment Climate Report)